Stocks were mixed but mostly higher on Thursday, despite closing well off their highs. A sell off in Disney was responsible for the Dow's weakness and lagging action, but small caps and the Nasdaq had strong days. The share prices below are from Wednesday since the TSP did not process Thursday's market action, but rather will combine Thursday and Friday's action into Friday's price - so that may look a little funny in Monday's commentary since the returns won't match Friday's index returns.
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The S&P 500 (C-fund) tried to rally for most of the day but it faltered near the close bringing it closer to the flat line during the light volume trading. There's not a whole lot of support until it gets near the early September high, but will the FOMO dip buyers allow it to get that low? We know the positive holiday seasonality is getting very close, so the bears may not have a lot of time to pull this back.
The DWCPF (S-fund) had a good day grabbing back about a third of Wednesday's losses although the action didn't really do anything to tell us which way it wants to go from here. The support off the old resistance line crossed the short-term rising trading channel near that circle, and that is potentially the downside target, although with those gaps still open below, a lot of technicians are hoping there is more downside to come to fill at least one of those gaps.
The EFA (I-fund) was up and like the small caps, got back some of Wednesday losses, but not enough to make any technical difference. Unlike the small caps chart above, this one has already broken below its short-term rising trading channel.
BND (Bonds / F-fund) was down even though the bond market was closed. It closed back below the 200-day EMA and its rising support line so that's not a good sign for bonds. There is an open gap up near 85.80 that could get attention, but that means it would have to rally and get back all of the losses caused by the CPI report, which may be a game changer.
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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The bond market was closed on Thursday and since rising yields on Wednesday, driven by the hot CPI report, gave the stock market a reason to pull back, the lack of bond yields trading on Thursday may have given the stock market a day of cover from the concern about yields and rates. Today may be a different story.
That said, BND is a bond ETF that did trade yesterday and it was down sharply implying another bet on rising yields, so perhaps that theory doesn't hold water. But the selling of bond ETFs may have been more of a stealth move since yields weren't moving.
On Wednesday we saw a sharp rally in yields after the CPI report indicated a hotter than expected inflationary environment. The downtrend broke after it successfully hit the head and shoulders target and filled the open gap near 1.4%. Now that it is above that resistance line, the stock market may begin worrying that yields could start to trend higher.
The dollar was up sharply over the last two trading sessions and is at a new 2021 high, but nearing the top of the rising trading channel.
Despite the market being open, both yesterday and today have a holiday feel to them, and Thursday's volume was quite light side with the bond market being closed, so we could be getting some holiday like activity, which tends to have a bullish bias, but also because volume is light, the indices can get pushed around, up or down, more easily. We'll probably get a better feel for what this market really wants to do on Monday.
That said, BND is a bond ETF that did trade yesterday and it was down sharply implying another bet on rising yields, so perhaps that theory doesn't hold water. But the selling of bond ETFs may have been more of a stealth move since yields weren't moving.
On Wednesday we saw a sharp rally in yields after the CPI report indicated a hotter than expected inflationary environment. The downtrend broke after it successfully hit the head and shoulders target and filled the open gap near 1.4%. Now that it is above that resistance line, the stock market may begin worrying that yields could start to trend higher.
The dollar was up sharply over the last two trading sessions and is at a new 2021 high, but nearing the top of the rising trading channel.
Despite the market being open, both yesterday and today have a holiday feel to them, and Thursday's volume was quite light side with the bond market being closed, so we could be getting some holiday like activity, which tends to have a bullish bias, but also because volume is light, the indices can get pushed around, up or down, more easily. We'll probably get a better feel for what this market really wants to do on Monday.
The S&P 500 (C-fund) tried to rally for most of the day but it faltered near the close bringing it closer to the flat line during the light volume trading. There's not a whole lot of support until it gets near the early September high, but will the FOMO dip buyers allow it to get that low? We know the positive holiday seasonality is getting very close, so the bears may not have a lot of time to pull this back.
The DWCPF (S-fund) had a good day grabbing back about a third of Wednesday's losses although the action didn't really do anything to tell us which way it wants to go from here. The support off the old resistance line crossed the short-term rising trading channel near that circle, and that is potentially the downside target, although with those gaps still open below, a lot of technicians are hoping there is more downside to come to fill at least one of those gaps.
The EFA (I-fund) was up and like the small caps, got back some of Wednesday losses, but not enough to make any technical difference. Unlike the small caps chart above, this one has already broken below its short-term rising trading channel.
BND (Bonds / F-fund) was down even though the bond market was closed. It closed back below the 200-day EMA and its rising support line so that's not a good sign for bonds. There is an open gap up near 85.80 that could get attention, but that means it would have to rally and get back all of the losses caused by the CPI report, which may be a game changer.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
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Thanks for reading, and have a great weekend!
Tom Crowley
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks for reading, and have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
